Dáil Éireann debate -
Tuesday, 9 Jun 1964

Vol. 210 No. 6

Supplementary Estimate, 1964-65. - Control of Imports (Amendment) Bill, 1964—Second and Subsequent Stages.

Minister for Industry and Commerce (Mr. J. Lynch)

I move that the Bill be now read a Second Time.

This is really a technical measure. Its purpose is to secure amendments of the Control of Imports Acts which will provide greater flexibility in the new situation arising from the gradual reduction of protective tariffs and the substitution of tariffs for import quotas. The process of reduction of protection, as Deputies are aware, is designed to provide a spur to greater efficiency and competitiveness in industry and to prepare us to take our part in the system of freer trade towards which there is an international movement. There must, however, be adequate safeguards during this period of transition against the dislocation or deflection of trade and, consequently loss of employment, which could result from uncontrolled imports of goods with which our manufacturers cannot reasonably be expected to compete. Indeed, the absence of such safeguards could militate against speedy readaptation of industry to meet the conditions of freer trade, because manufacturers might be afraid to rationalise their production if, by concentrating on certain lines, they increased their vulnerabilty to "low-cost" imports.

Nothing in the Bill is designed to limit fair competition. To do so would be contrary to the spirit of the reduction of protection. The alterations in the procedure are sought only for the purpose of enabling ceilings to be imposed on imports in those cases where external costs of production are so abnormally low by our standards or by normal international standards that our manufacturers could not reasonably be expected to compete with them within existing levels of tariff protection.

The Bill provides that the Government may place a limit on the import of certain goods without the necessity for an apportionment among importers. This will enable open general licensing to operate within the overall limit and traders will not have to seek licences to import the goods. Once the ceiling has been reached, however, the Revenue Commissioners will not admit further goods until a new Order has been made. Deputies will not expect me, because of risks of forestalling, to say what commodities are immediately in mind in this connection.

Where quota protected goods are concerned, it is also necessary that the same power to impose ceilings in similar circumstances should exist. This is necessary not merely to facilitate the readaptation of industries now protected by quota, but also to assist in the transition from quota protection to tariff protection. Under the existing control of imports legislation, there cannot be two quotas on the one category of goods. The Bill provides for the removal of that limitation so that a ceiling may be applied to imports of particular goods coming under an existing Quota Order. Where this is done there would, in effect, be a quota within a quota. Both quotas would, however, be divided among importers as at present and licences would continue to be necessary.

I recommend the Bill to the House. As I said at the beginning, its purpose is to tailor the Control of Imports Acts to the needs of a changing situation.

I might say that I have had an explanatory memorandum circulated because on looking at the Bill, I realised that on the face of it it would convey very little to Deputies and I hope the memorandum will be of some assistance to them.

Mr. T. F. O'Higgins

I understand that the object and purpose of this Bill is to undo or minimise the possible bad effects that might arise from the Government's declared policy in relation to trade liberalisation. If that is correct, this is a proper step to take Quite frankly, I hold the view in relation to industries that have developed and grown up under tariff protection over the past few decades that those which have survived and which are giving good employment should continue to have the full benefit of protection so that they can strengthen themselves for the period in which all tariff protection will have ceased. I know the contrary view is held by the Minister and has been expressed on behalf of the Government. One danger in the gradual liberalisation of trade before the Common Market comes about is that it may gradually weaken and destroy some existing industries which instead of having a sudden death, may in some cases have a slow death and may bleed away.

In this regard I am particularly concerned about the worsted industry in my constituency. Those engaged in it at the moment are producing and competing against well established producers in Britain and elsewhere for world markets. At the moment they find, as a result of this country being neither in the Common Market nor in EFTA, that they as Irish producers and sellers on the export market are being hit on the home front by the reduction of tariffs and quotas and are facing abroad the build-up of tariffs against them and in favour of their British competitors. That is a situation which may be only incipient, but if it continues, it could militate very seriously against the retention of, not to mind the increase in, export markets.

This Bill does recognise some of the dangers involved in the removal of tariffs and quotas. It empowers the Minister, when a certain stage is reached, to apply a clamp in the form of a quota for imported goods. For that reason, I welcome it and think it should be accepted by the House.

Mr. Tully

I also welcome this Bill, mainly because of the fact that for some time past we have been expressing from the Party benches here the view that there is a great danger in proceeding with the reduction of tariffs without having some way of counterbalancing the situation which will arise. We think the Minister is right in taking power to ensure we shall not reach the stage of reducing tariffs to such an extent that our industries which have grown up here behind a tariff wall will overnight be put out of business because of the import of low-cost materials from outside.

I do not propose to delay the House but I would ask the Minister to watch the other side of the picture. I am sure he is far more aware than I am of the position in which people who have had tariff protection over a number of years and who could come out from behind that tariff protection if they so desired have not done so, preferring to hold on to the protection, and therefore to extra profits, as long as they can get away with it. I am quite sure the Minister will look after that side of the picture and that these people will not be allowed to make the case that they still need very high tariff protection.

There is only one other point I wish to make in relation to a matter which is only very barely touched on in this Bill, that is, the question of people who have been setting up industries in these countries for export and who are controlled in that they cannot sell in this country. We recently had the case being made that a great deal of stuff being manufactured here for export could not be exported and therefore must sell as seconds on the home market. I hope the Minister will make some comment on that when he is replying. I know of a perfectly good industry which has been turned down by Córas Tráchtála recently on the ground that they could not export all their commodities and would, of necessity, flood the home market.

Mr. J. Lynch

In reply to Deputy O'Higgins's comment on the danger of some of our industries meeting with a sudden death if our tariffs continued to be reduced, the main purpose of the reduction rhythm now being carried on is to ensure that such a sudden death will not occur. The purpose of the rhythm is, as I have already said, to give a spur to our industries, to improve their efficiency and so ensure that they will maintain the home market and be in a position to compete on the export market with producers of similar types of goods from other countries.

The woollen and worsted industry is one with which I have had very close contact in recent years. I have had a number of discussions with them and have discussed the impact of the reduction in the protection they have, which incidentally is the most effective form of protection we can supply, that is, a quota. They are very well protected as far as the home market is concerned by this quota. It is true this quota is being extended at the same rate as other quotas are being extended but, by and large, they have been holding their own on the export market and, what is more, as a result of the great increase in the export of Irish made-up garments, they are sharing in that increase by a greater output themselves. In the meantime, they are contemplating the setting up of an adaptation council which has been proposed to them by the Committee on Industrial Organisation. As the House is aware, the purpose of the adaptation council is to see to what extent firms within a particular industry can rationalise, rationalise in lines of production, rationalise in export markets and in ordering of raw materials. I hope the woollen and worsted industry will proceed at the fastest possible rate to some form of rationalisation which will be to their advantage.

Deputy Tully referred to some industries which are benefiting from protection and suggested that because perhaps they are very efficient, they should not be allowed to benefit to the same extent as others not so efficient. Of course that would be a very difficult line of protection to administer. It illustrates the kind of difficulty with which any Minister for Industry and Commerce deals when it comes to protection for industry. The Deputy commented on the difficulty of industries that have been established for export, have failed to achieve the export targets they have set and have not been permitted to sell on the home market. These industries are the ones to which we give grants. Normally a grant is not given to the promoters of an industry to make products which are already made in sufficient quantity to supply the home market. However, if the promoters of an industry prove they have certain assured market outlets, then they may be given a grant, but on the condition that they sell only on the export market.

Mr. T. F. O'Higgins

What happens if, having got the grant, they break that undertaking?

Mr. J. Lynch

The undertaking has now been written into our latest Industrial Grants Act.

Mr. T. F. O'Higgins

Having got the grant, if they in fact enter the home market, what can you do?

Mr. J. Lynch

There is a provision in the agreement in which the undertaking is given for the return of the grant in certain circumstances.

Mr. Tully

That being so, is it not unfair that an industry should be denied a grant on the ground that they have already said they are going to export all they manufacture and are stopped because there may be a danger at some future stage——

Mr. J. Lynch

That is a matter for An Foras Tionscal and one of the many difficult matters An Foras Tionscal have to decide from time to time. In that respect, they did make a very close examination of the claims made by prospective industrialists as to the export markets they have. I should say, too, that in the Encouragement of External Investment Act which amends the Control of Manufactures Act, there is a provision which says that a firm which, by and large, will export 90 per cent of its products, taking one year with another, is entitled to set up business here without the obligation of getting a new manufacture licence from the Minister for Industry and Commerce. However, that is only a side issue.

Mr. Tully

The grant is the important thing.

Mr. J. Lynch

It is a fact that if a firm is given a grant for the purpose of exporting its entire output, that firm must honour its bond in that respect. Otherwise there are certain sanctions that An Foras Tionscal can impose on them and these sanctions have been given statutory force by this House.

Mr. Tully

There are certain firms who are not doing anything.

Mr. J. Lynch

Sometimes we get after them.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill considered in Committee.

Sections 1 to 4, inclusive, agreed to.

SECTION 5.

Question proposed: "That section 5 stand part of the Bill."

Mr. Tully

This section provides that goods can be manufactured in a specified group of countries or be consigned to the importer from a specified group of countries. How is it proposed to prevent any country whose goods are prevented by quota from sending them through another country?

Mr. J. Lynch

We can always call for certificates of origin. These are well known internationally; they are things we can rely on.

Mr. Cosgrave

There are two matters I wish to refer to. It is proposed to do away with any list of importers which formerly existed. Does the Minister anticipate that any difficulty will arise from goods being imported by different merchants, several of them arriving at the same time or within a short period of one another and the total quantity exceeding the quota? What arrangements will be made to ensure the quota is so distributed that some form of notice will be given to importers and to those awarded the quotas?

One of the critcisms sometimes made in connection with the operation of the quota arrangements as at present existing is that where firms cannot supply goods similar to or comparable with those requested by distributors, the distributors find it difficult to get from those manufacturers a certificate or a letter admitting that they are unable to supply the goods. In the absence of that, the Department are naturally reluctant to give import certificates. That is a criticism that has been expressed and I should be glad to know from the Minister if any cases have arisen and what steps were taken to ensure that import certificates are not unreasonably withheld where manufacturers refuse, or delay, or in some other way evade responsibility to distributors, to give them the required letter or certificate to the effect that they are not able to supply the goods required.

Mr. J. Lynch

In regard to the first part of Deputy Cosgrave's query, the goods in question are, of course, goods from low-cost countries. The normal quota to be appointed in that case would be of very low dimensions. That will be included in the quota order. I do not anticipate much of a rush to get in goods in excess of the maximum order by one firm or to get a big proportion of the entire quota through one firm, but if a difficulty such as this arises, it will be possible for the Minister to give an exceptional licence.

Mr. Cosgrave

I should perhaps point out that it arises more in the case of high-cost or quality articles rather than low-cost items.

Mr. J. Lynch

I do not think it would. In the ordinary way, licences would effectively get over many of the problems that would arise.

In reply to the Deputy's second query, it is true that where the home manufacturer is protected, if he is asked by a person for a particular product and if he does not make that type of product, the tendency is for the home manufacturer to say that the product he does make is good enough or better than the one sought. The Department have long experience of this exercise of the person seeking to get a duty-free licence for a particular commodity being referred to a home manufacturer and being told by him: "I can make that article or something as good as it." If it appears to the officers of the Department that the home manufacturer's claim cannot be sustained, then a duty-free licence is given to the person needing the product.

Some difficulties do arise but it is inevitable if we are to maintain for some time this protection regime in the interests of our own producers and workers, but by and large I do not think the difficulties that do arise are very great. Speaking for myself, I give those licences reluctantly but I am not unreasonable where a proper case has been established.

Mr. Tully

Could the Minister say if the powers in this Bill can be used to ease the balance of payments position? There are countries in Eastern Europe particularly from which we take a lot more in imports than they take from us. Could this Bill be used to prevent imports from them and to direct them to countries which buy freely from us and in respect of which the balance of payments is in no difficulty? Is it possible to use the Bill in that way?

Mr. J. Lynch

No. The Bill is primarily to protect our own manufacturers, our own workers, against low-cost countries. We have the Restriction of Imports Act which enables us to restrict imports, particularly from Iron Curtain countries, to relieve the balance of payments problem.

Mr. Tully

It would not appear from the figures as if that Act were being exercised to the full.

Mr. J. Lynch

One must have regard to the nation's best interests.

Mr. Tully

That is a simple one.

Mr. J. Lynch

For instance, manufacturers who want supplies of certain raw materials might get them cheaper and of better quality in certain countries. I am keeping a close eye on this and am considering to what extent I can use the powers given in the Restriction of Imports Act.

Mr. Treacy

I am somewhat heartened that this Bill will provide a measure of protection for industry here and the workers in it. Might I ask to what extent the Minister would be empowered under this section to prevent the dumping of cheap goods on our market?

Mr. J. Lynch

This section is designed to provide against dumping of that nature. The goods must be of the kind I have been referring to— goods from countries with low labour costs by comparison with our own and European standards.

Mr. Treacy

Might I also draw the Minister's attention to the concern of so many industries that the protection of the quota system which they have enjoyed for such a long time is being gradually eliminated by the policy of the Minister's Department. Certain industries have claimed that it is necessary and desirable to maintain these quota restrictions for a few years more in order to give these industries a further opportunity of adapting themselves to the stiffer competition they must meet in freer market circumstances. Will the Minister comment on anxiety felt in industry and in the trade unions that the Minister's Department is reluctant to continue quota protection? I wonder why, when one considers that these industries, since we are not in the Common Market and have no positive idea when we shall be, have not, as yet, the availability of that wonderful market? Does the Minister not think it unwise that he should remove this umbrella of protection in such circumstances? There is an ingrained fear in many of the unions and industries that if quota protection is removed to the extent the Minister has in mind, there will be dumping and that inroads will be made into our industries.

Many of these industries have already been examined by the CIO and there has been a clear indication that very serious redundancy will arise in freer trade circumstances. Some of those industries are making a genuine effort to adapt themselves and adopt the most modern methods, equipment and devices to contend with stiffer competition in free trade circumstances. They are deeply perturbed by the Minister's policy of insisting that the quota system be eliminated. I ask the Minister to give an indication that he will have regard to the views of the Federation of Employers and the unions in this very serious matter of reducing quotas still further until we shall have a tariff system at a time when we do not enjoy the benefits of free trade in Common Market circumstances. It is a genuine worry on the part of the union in which I have a particular interest and in the industry with which I am very much concerned. I ask the Minister to comment on his reasons for rejecting the very sensible approach of the captains of industry and of the union in respect of this very serious matter of reducing quotas—I presume—in anticipation of our entering the Common Market.

An Leas-Cheann Comhairle

The Deputy is making a Second Reading speech on a section of the Bill.

Mr. Treacy

The matter is very urgent and important, and I do not think the Minister will object to my posing the question on this section.

An Leas-Cheann Comhairle

A Second Reading speech is out of order on Committee Stage.

Mr. Cunningham

I should like some clarification. As I understand it the Bill is protection for the time when further reductions will take place and already some reductions have taken place in the case of duties on imported goods and that this is actually an extension—rather than what the last speaker said—of the quota system made applicable to more goods which will become cheap by the reduction of tariffs. I should like that cleared up.

Mr. J. Lynch

It would take a long time to reply to the points made by the two Deputies who have just spoken but as I said, when replying to the debate on Second Reading, quota protection is the most extreme form of protection we can apply. The reduction of ten per cent in tariffs is being applied also to quotas. In other words, quotas are being extended by ten per cent. Nevertheless, the quotas are remaining. Take, for example, the commodity for which 100 tons quota is appointed. That means that 100 tons of that commodity can be imported under the ten per cent extension rhythm we have now in operation. The first increase in the quota would allow 110 tons of that commodity in. I do not think it would be reasonable to continue a system of tariff reduction, and at the same time, leave quotas untouched.

I have been meeting some of the firms and some of the trade unions representing workers employed by these firms from time to time about the effect of extension of quotas on the employment given by the firms and on the firms themselves and, by and large, I think that the arrangements we are now making will be in the long term for the benefit of these firms. I described myself to one of them as being like the mother administering the notvery-tasteful medicine to the child as she says: "I know this is not nice but it will be for your good in the long run." I think that is the position.

In regard to Deputy Cunningham's question, I want to repeat that this Bill is a means whereby we can protect our manufacturers against low-cost countries, usually far eastern and Communist countries. I want to say very definitely that almost every country in Europe, including EEC countries, have devices in operation such as I am proposing to the House now. In the case of a certain type of goods that are protected by tariff, if the tariff is not sufficient to ensure adequate protection to our manufacturers, we can employ this quota device by which we can exclude this unfair and unusual type of competition from low-cost countries where wages are depressed.

Where the quota is in existence— and at the present our quotas are global—every country in the world can take advantage of them. Normally, we would not be perturbed about imports from countries where the same kind of conditions of employment apply as obtain here but if a low-cost country tries to take advantage of that quota, we can step in and appoint a quota within that quota arrangement applicable to that low-cost country and that type of goods, so that in general the advantage of the quota will not be unfairly availed of by low-cost producers.

Mr. Cunningham

In the case of goods which do not come in under quota but under tariff and where the tariff is reduced, with resulting increase in the imports of these goods to this country, does this Bill provide for putting those goods under quota?

Mr. Treacy

I am speaking of an important body and the fundamental fears of such a body if the quota system is abolished too quickly. I am talking in terms of one of the Minister's very good ideas, the creation of adaptation councils, one of which is functioning expertly at the present time. Would it not be able to get worthwhile assurance from the Minister of the little extra protection they require in order to do the job?

Mr. J. Lynch

I know the case the Deputy has in mind but I do not want to mention it here publicly. I can assure the Deputy that I have given the request to which he refers the closest and most sympathetic consideration possible. If I foresee dangers arising, which the industry will not be able to overcome, it is only natural that I shall be disposed to have another look at that request. In the meantime, I do not think danger is there. I appreciate fully the efforts being made by the industry within their adaptation council and I can assure the Deputy that my policy will not be to the detriment of the efforts being made there. I do not expect the Deputy wishes me to give an undertaking now that I shall do one thing or another on behalf of that industry. I have the best interests of the industry at heart and my policy will be to preserve that industry and to maintain the employment now being given in it and, if possible, increase it.

Mr. Treacy

I should like to say I am pleased to hear the Minister's understanding of the problem and the indication of goodwill which he has given us here today, that he will have regard to the situation that existed in the late 40's in the industry to which I refer. In the case I have in mind, we had a situation in which the quota system was abolished and free trade operated for some months. We had a serious condition of unemployment and acute redundancy and we do not want to see such a situation arise again.

I should not like to think that protection would not be afforded until such time as dumping actually took place and unemployment took place. It might then be too late in such circumstances. However, I accept the Minister's interest and understanding of the problem to which I have had to advert.

Question put and agreed to.

Section 6 agreed to.

Title agreed to.

Bill reported without amendment, received for final consideration and passed.